VLCC rates unsteady

Rates on benchmark routes stayed flat or continued to dip in some cases, brokers told, as there is more than enough tonnage for current market requirements.

Rates on benchmark routes stayed flat or continued to dip in some cases, brokers told, as there is more than enough tonnage for current market requirements.

The VLCC spot market remained quiet last week, as a lull in activity extended itself due to, by most accounts, higher compliance by OPEC members to agreements since last September to cut 4.2 million barrels per day (bpd) in supply.

Rates on benchmark routes stayed flat or continued to dip in some cases, brokers told, as there is more than enough tonnage for current market requirements.

Double hull MEG-East voyages fetched WS 37.5 last week just as it did on the previous week.

?Eastern charterers have been quite active but any attempt by owners to lift rates has been effectively capped by easy access to single hull tonnage,? said one broker.

Players say MEG-UKC voyages are between WS 32.5 to as low as WS 26 at present while the Bonny-LOOP route softened a few points to stay around WS 50.

"The situation is being exacerbated by the return of VLCC tonnage into the spot market from previous fixtures recently to store crude"According to Fearnleys, ?given the dearth of demand and the plentiful supply of VLCC tonnage, there is little to indicate that things could improve any time soon.According to OPEC figures, the 12 member states have so far delivered about 80% of the 4.2 million bpd supply cut and is reportedly ?working hard? to achieve full compliance, the reason for which further cut agreements were deemed unnecessary for the moment at OPEC's recent Vienna meeting.

That March 15 decision to not enforce new supply cuts has brought some temporary respite to the VLCC spot markets and the broader segments on the whole.

Further pledges to cut more supply would ?definitely put owners in a new state of panic given that earnings are currently already below average,? said one broker.

According to Bassøe, average earnings on the MEG-Korea routes are around $32,000 per day per vessel currently while earnings on the MEG-UKC routes have sunk to as low as $20,000 per day.

Average cash break-even earnings for the VLCC spot market is below $25,000 per day per vessel, but break-even rates are calculated differently across the industry, with some companies like Frontline Ltd. reporting its break-even rate to be as high as $34,700 per VLCC.

Bearish global oil demand forecasts have been casting a shadow on tanker markets and the VLCC spot market in particular, which still continues to weaken on little activity.

Activity levels are low primarily because cargo requirements are not increasing and many are blaming reduced output from OPEC.

The situation is being exacerbated by the return of VLCC tonnage into the spot market from previous fixtures recently to store crude.